-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NEmK1zUx02cA5whcL3f3Uhu/3mITt98RPftXkuIsx/kRGsjWO/ctpIKkSywMAwus pG7xrwEJa7WEvxCypa0hiQ== 0000926274-03-000059.txt : 20030220 0000926274-03-000059.hdr.sgml : 20030220 20030220172102 ACCESSION NUMBER: 0000926274-03-000059 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030220 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20030220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY FEDERAL BANCORP CENTRAL INDEX KEY: 0000910492 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 351894432 STATE OF INCORPORATION: IN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22880 FILM NUMBER: 03574820 BUSINESS ADDRESS: STREET 1: 700 S GREEN RIVER ROAD STREET 2: SUITE 2000 CITY: EVANSVILLE STATE: IN ZIP: 47715 BUSINESS PHONE: 8124692100 MAIL ADDRESS: STREET 1: 18 NW FOURTH ST STREET 2: PO BOX 1347 CITY: EVANSVILLE STATE: IN ZIP: 47706-1347 8-K 1 ffb-8k.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 20, 2003 FIDELITY FEDERAL BANCORP ------------------------------------------------------ (Exact name of registrant as specified in its charter) Indiana 0-22880 35-1894432 - ---------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (Employer of incorporation) Identification No.) 18 NW Fourth Street, Evansville, Indiana 47708 ---------------------------------------- ----------- (Address of Principal Executive Offices) (Zip Code) (812) 424-0921 ---------------------------------------------------- (Registrant's telephone number, including area code) The information provided pursuant to Item 9 in this Current Report on Form 8-K, including exhibit 99.2, is furnished pursuant to Item 9 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section. Furthermore, the information provided pursuant to Item 9 in this Current Report on Form 8-K, including exhibit 99.2,shall not be deemed to be incorporated by reference into the filings of Fidelity Federal Bancorp under the Securities Act of 1933. Item 5. Other Events On February 20, 2003, Fidelity Federal Bancorp issued the press release attached hereto as exhibit 99.1. Item 7. Financial Statements and Exhibits Item 9. Regulation FD Disclosure Supplemental disclosure to press release issued July 12, 2002, regarding completion of sale of affordable housing subsidiaries and related assets. The supplemental disclosure is attached hereto as exhibit 99.2. -2- (c) Exhibits 99.1 Press release, dated, February 20, 2003. 99.2 Supplemental disclosure regarding completion of sale of affordable housing subsidiaries and related assets. * * * * -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. FIDELITY FEDERAL BANCORP (Registrant) Date: February 20, 2003 By: /s/ Donald R. Neel ----------------------------- Donald R. Neel, President and Chief Executive Officer -4- Index to Exhibits Exhibit No. Description 99.1 Press Release dated February 20, 2003 99.2 Supplemental disclosure regarding completion of sale of affordable housing subsidiaries and related assets. -5- EX-99.1 3 ex99-1.txt EXHIBIT 99.1 Contacts: Donald R. Neel, President and CEO (812) 429-0550, ext. 3301 Mark A. Isaac, VP and CFO (812) 429-0550, ext. 3319 For Immediate Release: February 20, 2003 FIDELITY FEDERAL BANCORP REPORTS FOURTH QUARTER RESULTS (Evansville, IN) Fidelity Federal Bancorp (the "Company") (NASDAQ: FFED), the holding company of United Fidelity Bank, fsb (the "Bank"), reported that during the quarter ended December 31, 2002 it incurred certain non-cash charges and recorded a net loss for the quarter of $1.976 million, or $0.30 per share on a basic and diluted basis. These results compare to net income of $77,000, or $0.01 per share on a basic and diluted basis for the quarter ended December 31, 2001. For the fiscal year ended December 31, 2002, the Company reported a net loss of $4.395 million or $0.71 on a basic and diluted basis, compared to net income of $224,000, or $0.04 for the same period last year. The non-cash charges recorded during the fourth quarter of 2002 relate primarily to reserves established for the Company's income tax receivable and to certain asset impairment charges. The Company recorded a valuation allowance and certain other tax-related charges that reduced the carrying value of its income tax receivable by approximately $1.2 million. These charges were primarily due to a change in current estimates of the realizability of certain tax losses and tax credit carryforwards, and sales of assets that resulted in capital gains for tax purposes. The Company also recorded charges of approximately $455,000 to adjust premiums on mortgage-backed securities and mortgage servicing rights to their current estimated realizable values, primarily as a result of the effect of the historically low interest rate environment. In addition, the Company recorded a charge of approximately $708,000 to adjust its retained interests in securitized assets. This charge was primarily as a result of lower than expected interest rates which resulted in the Company securitizing loans at lower interest rates than originally estimated and experiencing faster than expected prepayment speeds on the seasoned portion of the securitized loans. These charges were partially offset in the fourth quarter by a pre-tax gain recorded of approximately $223,000 related to the sale of the Company's affordable housing interests. Capital ratios at the Bank remain well above regulatory "well-capitalized" minimums. Risk-based capital at December 31, 2002 was 12.53%, compared to 14.39% at December 31, 2001. The Bank's tangible capital ratio was 8.52% at December 31, 2002 compared to 8.48% at December 31, 2001. The Bank's Tier 1 risk-based capital to assets was 9.95% at December 31, 2002, compared to 10.71% at December 30, 2001. A decrease in consumer loan sales for the quarter and for the year caused non-interest income to decline compared to last year. Total non-interest income was $727,000 for the quarter compared to $1.1 million last year, and totaled $2.9 million for 2002 compared to $3.6 million in 2001. Non-interest expense increased to $3.6 million for the fourth quarter of 2002 compared to $1.7 million last year. For the year-to-date period, non-interest expense increased to $11.3 million in 2002 compared to $5.7 million in 2001, primarily due to charges recorded in the third and fourth quarters of 2002. -Next Page- The Company's net interest margin for the quarter decreased to 1.77%, down from 2.31% last year. The decline was primarily caused by a reduction of the loan portfolio resulting from consumer loan sales in the third and fourth quarters. However, increased consumer loans outstandings during the first half of the year, increased commercial lending volume this year, and a continued decline in funding costs positively impacted net interest margin for 2002 resulting in an increase in net interest margin to 2.40% compared to 2.03% for the same period last year. Total classified assets decreased to $6.0 million at December 31, 2002 compared to $7.7 million at December 31, 2001. The Company and Bank have successfully reduced their respective classified or problem assets, utilizing both a non-recourse, FHA multifamily loan program, and non-recourse financing obtained from traditional financial institutions. The allowance for loan loss and valuation allowance for letters of credit to total loans and letters of credit at December 31, 2002 and 2001 was 1.24% and 1.87%, respectively. Non-performing assets as a percentage of total assets were 2.35% at December 31, 2002 compared to 2.43% at December 31, 2001. President and CEO Donald R. Neel noted, "We are pleased that the Company met its strategic goal of significantly reducing its risk profile. During 2002 we were able to further reduce classified assets; execute an agreement to sell a property which, if completed, will reduce total classified assets by an additional 50%; dispose of the Company's affordable housing portfolio; implement alternative funding sources for the Company's consumer lending business; and maintain capital ratios at well above regulatory minimums." Neel stated, "We believe that with these accomplishments in 2002, the Company is better positioned for future growth. However, the process of improving core earnings, and thus increasing the value of the Company's core franchise, is a long-term proposition requiring a disciplined approach focused on community banking fundamentals." Neel also noted, "Despite our disappointment concerning 2002 results, most of the charges recorded during the fourth quarter and for the year were non-cash and non-recurring in nature and are not expected to have an adverse impact on the Company's future operations." This news release contains forward-looking statements that are based upon the Company's current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Among the risks and uncertainties that could cause actual results to vary materially is the impact of the Bank's Supervisory Agreement with the Office of Thrift Supervision. Other risks and uncertainties include economic conditions generally and in the market areas of the Company and the Bank, overall loan demand, and increased competition in the financial services industry. Actions by the Federal Reserve Board and changes in interest rates, loan prepayments by, and the financial health of, the Bank's borrowers, and other factors described in the reports filed by the Company with the Securities and Exchange Commission could also impact current expectations. The Company is a unitary savings and loan holding company based in Evansville, Indiana. Its savings bank subsidiary, United Fidelity Bank, fsb, maintains five locations, four in Evansville and one in Warrick County. The Company's stock, which is quoted on NASDAQ under the symbol FFED, most recently traded at $1.44. Information on FFED is available on the Internet at http://www.unitedfidelity.com -- END - FIDELITY FEDERAL BANCORP FINANCIAL HIGHLIGHTS (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, OPERATIONS: 2002 2001 2002 2001 - ----------- ----------- ----------- ----------- ----------- Interest income $ 1,828 $ 2,648 $ 9,337 $ 11,455 Interest expense 1,281 1,816 6,022 8,501 ----------- ----------- ----------- ----------- Net interest income 547 832 3,315 2,954 Provision for loan losses 40 202 (360) 1,349 Non-interest income 727 1,083 2,939 3,608 Non-interest expense 3,564 1,712 11,339 5,698 ----------- ----------- ----------- ----------- Income (loss) before income tax (2,330) 1 (4,725) (485) Income taxes (354) (76) (243) (513) ----------- ----------- ----------- ----------- Income before extraordinary item (1,976) 77 (4,482) 28 Gain on extraordinary item, net of tax -- -- 87 196 ----------- ----------- ----------- ----------- Net income (loss) $ (1,976) $ 77 $ (4,395) $ 224 =========== =========== =========== =========== PER SHARE: - ---------- Basic net income (loss) $ (0.30) $ 0.01 $ (0.71) $ 0.04 Diluted net income (loss) (0.30) 0.01 (0.71) 0.04 Book value at period end 1.42 1.99 Market price (bid) at period end 1.47 2.30 Average common and common equivalent shares outstanding 6,649,664 5,735,483 6,183,269 5,146,726 AVERAGE BALANCES: - ----------------- Total assets $ 144,878 $ 162,288 $ 159,625 $ 165,592 Total earning assets 122,813 142,750 138,033 145,342 Total loans 72,935 110,666 94,821 111,572 Total deposits 109,808 120,522 119,085 125,853 Total stockholders' equity 10,968 11,432 11,936 10,288 FHLB advances 9,466 13,758 13,561 10,926 Borrowings 11,012 12,915 11,998 13,525 PERFORMANCE RATIOS: - ------------------- Return on average assets -5.41% 0.19% -2.75% 0.14% Return on average equity -71.50% 2.67% -36.82% 2.18% Net interest margin 1.77% 2.31% 2.40% 2.03% LOAN QUALITY RATIOS: - -------------------- Net charge-offs to average loans and letters of credit 0.68% -0.30% 0.77% 0.60% Allowance for loan and letter of credit losses to total loans and letters of credit at end of period 1.24% 1.87% Non-performing loans to total loans 1.30% 3.46% Non-performing assets to total assets 2.35% 2.43% SAVINGS BANK CAPITAL RATIOS: - ---------------------------- Tangible equity to assets at end of period 8.52% 8.48% Risk-based capital ratios: Tier 1 capital 9.95% 10.71% Total capital 12.53% 14.39% AT PERIOD END: - -------------- Total assets $ 132,290 $ 159,659 Total earning assets 113,879 141,868 Total loans 73,924 106,570 Total deposits 106,791 120,155 Total stockholders' equity 9,588 11,895 FHLB Advances 3,000 12,333 Borrowings 10,586 12,317 Common shares outstanding 6,740,883 5,987,009
EX-99.2 4 ex99-2.txt EXHIBIT 99.2 FIDELITY FEDERAL COMPLETES SALE OF AFFORDABLE HOUSING SUBSIDIARIES AND RELATED ASSETS On January 3, 2003, Fidelity Federal Bancorp (NASDAQ:FFED) ("Company")and its wholly-owned subsidiary, United Fidelity Bank, announced that on December 27, 2002 it completed the sale to Pedcor Funding Corporation of the assets connected to their affordable housing activities began in the mid-1990's. The assets consisted of the stock of Village Housing Corporation (a wholly-owned subsidiary of United Fidelity Bank), the stock of Village Affordable Housing Corporation (a wholly-owned subsidiary of Fidelity Federal), an interest rate swap, and notes from affordable housing limited partnerships in which Village Housing Corporation is the general partner. The Company determined to pursue the sale of these assets in order to further focus on its community banking activities. It also determined that the elimination of the contingent liabilities associated with the ownership of the affordable housing general partnerships interests would improve its overall risk profile. Related Parties - --------------- The purchaser, Pedcor Funding Corporation ("Pedcor"), is a company controlled by Bruce A. Cordingley, Gerald K. Pedigo, and Phillip J. Stoffregen, directors of Fidelity Federal and members of a group which beneficially owns, including stock options and warrants, approximately 69.9% of Fidelity Federal's issued and outstanding stock. Because of the relationship between Pedcor and Fidelity Federal, Messrs. Cordingley, Pedigo, and Stoffregen did not participate in either the discussion or the vote by the boards of directors of Fidelity Federal and United Fidelity Bank regarding the sale. The sale was unanimously approved by all other members of the respective Boards of Directors of Fidelity Federal and United Fidelity Bank and was completed following receipt of all necessary regulatory approvals and a fairness opinion. The fairness opinion was rendered by Crowe Chizek & Co., an independent, non-affiliated entity which has never performed services for Messrs. Cordingley, Pedigo, or Stoffregen or any entity they control (other than Fidelity Federal or United Fidelity Bank), and has not performed services within the last five years for Fidelity Federal or United Fidelity Bank. Prior Marketing Efforts - ----------------------- Over the past four years, the Company has approached several entities including syndicators, investment banks, and individual companies regarding the possibility of selling its affordable housing related assets. Efforts to sell general partnership interests owned by Village Housing Corporation resulted in indications that would require the Company to compensate the potential buyer(s) to assume the liability of ownership. In one instance, disposal of nine of the seventeen general partnership interests would have resulted in the payment of over $3 million from the Company to the prospective buyer. Included in the assets of Village Affordable Housing Corporation and Village Housing Corporation was real estate adjacent to affordable housing developments. During the four-year period noted above, the Company had utilized various non-affiliated real estate brokers to sell the real estate, generating little or no offer activity, due to the limited uses of the property. Over the past two years, the Company also attempted to sell subordinate notes related to loans to the individual partnerships in a competitive bidding auction. Invited to bid were syndicators, investment bankers, real estate developers, and affiliates of Pedcor. Except for one incomplete bid, there were no bidders on these assets other than affiliates of Pedcor. Based on the low level of indicated interest received for purchasing these assets, the Boards believed that entering into a competitive bidding arrangement for the assets sold in this transaction may have resulted in a lower purchase price. After analyzing a possible sale, management of the Company and its independent directors decided to solicit an indication of interest in the purchase of these assets from Messrs. Cordingley, Pedigo, and Stoffregen, who control the management company for the affordable housing limited partnerships involved. The Transaction - --------------- The Company solicited an offer from Messrs. Cordingley, Pedigo, and Stoffregen for several reasons. First, under the terms of the limited partnership agreements, any change in control of the general partner, which is Village Housing Corporation, requires the consent of the limited partners, none of whom are affiliated with either the Company or Pedcor. Because Messrs. Cordingley, Pedigo, and Stoffregen already were considered to control the general partner due to their ownership of more than 50% of the voting stock (including options and warrants of the Company), no consent by the limited partners to a change in control of the general partner to Pedcor was necessary. This was considered important because in May 2000 the Company's shareholders approved a sale of 1.46 million shares of stock to an affiliated company of Pedcor. A provision of the stock purchase agreement required entities controlled by Messrs. Cordingley, Pedigo, and Stoffregen to provide an annual operating deficit guarantee until May 2005 for the portfolio of limited partnerships projects of up to $300,000 in the aggregate, and provide a management subsidy agreement until 2010. This guarantee obligation and management subsidy agreement terminated if the affordable housing project was sold to a third party, which would eliminate a layer of financial support for the limited partners. The Company believed that termination of the financial and management subsidies, would make it unlikely that the limited partners would have consented to any purchaser other than Pedcor. Also, many of the limited partnerships utilize FHA 223(f) financing, which requires prior approval by FHA of a change in the general partner. This FHA approval process, even if such approval is ultimately received, may have delayed any transaction by 6-12 months. Selling to Pedcor avoided this delay since it did not need FHA approval for the reasons discussed above. Second, one of the assets owned by Village Housing Corporation was an income tax receivable, which the Company could only use to offset future income. Under applicable federal tax law, only an entity controlling more than 50% of Fidelity Federal (including options and warrants) could acquire this asset and utilize all of its tax benefits. As such, the only entity other than the Company which could utilize a substantial part of this asset was an entity controlled by Messrs. Cordingley, Pedigo, and Stoffregen. The Company determined that the value received in cash for the tax receivable as a part of the sale was significantly greater than the anticipated value if it retained this asset or sold it to a third party. Third, some of the assets of Village Affordable Housing Corporation consisted of four parcels of land adjacent to affordable housing developments. The Company had unsuccessfully attempted for the last several years to sell these properties, notwithstanding having listed the parcels for during the period with local real estate brokers. Fourth, as a part of the sale of the assets, Pedcor has agreed to indemnify the Company as to certain contingent liabilities, including a letter of credit, two first mortgage loans and a contingent liability for an interest rate swap with a notional value of $2.54 million. The Company would have considered refinancing this letter of credit and these two first mortgage loans if it had not received the additional credit support provided by the agreement of Pedcor for indemnification. In this regard, Fidelity Federal had received a commitment and indication of amounts that could have been refinanced, which would have resulted in additional cash outlays of approximately $800,000. . Because of Pedcor's familiarity with the assets being sold, the amount of time spent by Fidelity Federal's management in connection with due diligence requirements was minimized and Fidelity Federal was required to make only limited representations with respect to the condition and history of the assets. Management believes that an unrelated purchaser would have required a more extensive due diligence process. Management also believes that an unrelated purchaser would have required a significantly higher level of representations and warranties from Fidelity Federal with respect to the condition of the assets being sold, which could have created additional contingent liabilities for Fidelity Federal. The sale price for the all-cash transaction was approximately $1.7 million, thus the sale provided the Company with additional liquidity. Because a portion of the assets sold had been previously written off for regulatory capital purposes, the sale resulted in an increase in the regulatory capital of United Fidelity Bank. Additional regulatory capital provides the Bank future capacity to increase earning assets, which could then increase net interest income. This release contains forward-looking statements that are based upon the Company's current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Other risks and uncertainties include economic conditions generally and in the market areas of Fidelity Federal and United Fidelity Bank which could impact the Bank's ability to generate additional business to support planned balance sheet growth. -----END PRIVACY-ENHANCED MESSAGE-----